MiX Telematics Announces Financial Results for Fourth Quarter and Preliminary Results for Full Fiscal Year 2019

MiX Telematics Limited (NYSE: MIXT, JSE: MIX), a leading global provider of fleet and mobile asset management solutions delivered as Software-as-a-Service (SaaS), today announced financial results for its fourth quarter and for its full fiscal year 2019, which ended March 31, 2019.

“Our fourth quarter marked a solid continuation of trends we have experienced throughout the year. The strong performance was driven by the continued growth in our premium fleet subscriptions globally, improvements in ARPU and ongoing operating leverage in the business,” said Stefan Joselowitz, Chief Executive Officer of MiX Telematics. “During fiscal 2019, we upwardly revised our long-term adjusted EBITDA margin target to 35% plus, as we expanded our margins by almost 500 basis points to 30.5% and generated record positive free cash flow of R177 million. We remain confident in our ability to achieve our long-term goals given our strong pipeline and ability to further enhance margin accretion across the business.”

Financial performance for the three months ended March 31, 2019

Subscription revenue: Subscription revenue was R443.8 million ($30.7 million), an increase of 18.8% compared with R373.6 million ($25.8 million) for the fourth quarter of fiscal 2018. Subscription revenue increased by 13.1% on a constant currency basis, year over year. Subscription revenue benefited from an increase of 73,600 subscribers from April 2018 to March 2019, representing an increase in the subscriber base of 10.9% during that period. Subscription revenue also benefited from higher average revenue per user.

Total revenue: Total revenue was R507.9 million ($35.1 million), an increase of 12.0% compared to R453.5 million ($31.3 million) for the fourth quarter of fiscal 2018. Total revenue increased by 6.3% on a constant currency basis, year over year. Hardware and other revenue was R64.1 million ($4.4 million), a decrease of 19.8%, compared to R79.9 million ($5.5 million) for the fourth quarter of fiscal 2018.

Gross margin: Gross profit was R339.8 million ($23.5 million), compared to R296.0 million ($20.4 million) for the fourth quarter of fiscal 2018. Gross profit margin was 66.9%, compared to 65.3% for the fourth quarter of fiscal 2018.

Operating margin: Operating profit was R97.8 million ($6.8 million), compared to R73.8 million ($5.1 million) for the fourth quarter of fiscal 2018. Operating margin was 19.3%, compared to 16.3% for the fourth quarter of fiscal 2018. In addition to the gross margin improvement above, the margin expansion was also attributable to improved economies of scale and ongoing cost management initiatives. Operating expenses of R242.3 million ($16.7 million) increased by R18.6 million ($1.3 million), or 8.3%, compared to the fourth quarter of fiscal 2018. Operating expenses represented 47.7% of revenue compared to 49.3% of revenue in the fourth quarter of fiscal 2018.

Adjusted EBITDA: Adjusted EBITDA, a non-IFRS measure, was R167.6 million ($11.6 million), compared to R130.2 million ($9.0 million) for the fourth quarter of fiscal 2018. Adjusted EBITDA margin, a non-IFRS measure, for the fourth quarter of fiscal 2019 was 33.0%, compared to 28.7% for the fourth quarter of fiscal 2018.

Profit for the period and earnings per share: Profit for the period was R77.0 million ($5.3 million), compared to R64.3 million ($4.4 million) in the fourth quarter of fiscal 2018. Profit for the period included a net foreign exchange loss of R0.1 million ($0.01 million) before tax. During the fourth quarter of fiscal 2018, profit for the period included a net foreign exchange loss of R1.2 million ($0.1 million).

Earnings per diluted ordinary share were 13 South African cents, compared to 11 South African cents in the fourth quarter of fiscal 2018. For the fourth quarter of fiscal 2019, the calculation was based on diluted weighted average ordinary shares in issue of 580.1 million compared to 580.8 million diluted weighted average ordinary shares in issue during the fourth quarter of fiscal 2018.

The Group’s effective tax rate was 22.1%, compared to 13.7% in the fourth quarter of fiscal 2018. Ignoring the impact of net foreign exchange gains and losses net of tax and share based compensation costs related to Performance Share Awards net of tax, the tax rate which was used in determining adjusted earnings below, was 20.4% compared to 26.9% in the fourth quarter of fiscal 2018.

During the fourth quarter of fiscal 2019, the Group recognized deferred tax assets of R3.6 million ($0.3 million) in respect of a portion of the available tax losses in the Americas, Brazil and Europe segments. These tax losses were incurred in prior years. An ongoing improvement in these regions’ results has resulted in these deferred tax assets being recognized in respect of the future utilization of the historical tax loss considered probable at period end. The recognition of these deferred tax assets reduced the Group’s effective tax rate in the quarter by 3.6%.

On a U.S. Dollar basis, using the March 31, 2019 exchange rate of R14.4789 per U.S. Dollar, and a ratio of 25 ordinary shares to one American Depositary Share (“ADS”), profit for the period was $5.3 million, or 23 U.S. cents per diluted ADS compared to $4.4 million, or 19 U.S. cents per diluted ADS in the fourth quarter of fiscal 2018.

Adjusted earnings for the period and adjusted earnings per share: Adjusted earnings for the period, a non-IFRS measure, was R81.0 million ($5.6 million) compared to R55.3 million ($3.8 million) for the fourth quarter of fiscal 2018. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 14 South African cents, compared to 10 South African cents in the fourth quarter of fiscal 2018.

On a U.S. Dollar basis, using the March 31, 2019 exchange rate of R14.4789 per U.S. Dollar, and a ratio of 25 ordinary shares to one ADS, the adjusted profit for the period was $5.6 million, or 24 U.S. cents per diluted ADS, compared to $3.8 million, or 16 U.S. cents per diluted ADS in the fourth quarter of fiscal 2018.

Statement of Financial Position and Cash Flow: At March 31, 2019, the Group had R353.2 million ($24.4 million) of net cash and cash equivalents, compared to R290.5 million ($20.1 million) at March 31, 2018.

The Group generated R129.4 million ($8.9 million) in net cash from operating activities for the three months ended March 31, 2019 and invested R49.6 million ($3.4 million) in capital expenditures during the quarter (including investments in in-vehicle devices of R24.6 million or $1.7 million), leading to free cash flow, a non-IFRS measure, of R79.8 million ($5.5 million) compared to free cash flow of R57.9 million ($4.0 million) for the fourth quarter of fiscal 2018. The Group utilized R18.0 million ($1.2 million) in financing activities, compared to R8.9 million ($0.6 million) utilized during the fourth quarter of fiscal 2018. The cash utilized in financing activities during the fourth quarter of fiscal 2019 mainly consisted of dividends paid of R16.8 million ($1.2 million) and the payment of lease liabilities of R1.1 million ($0.1 million). The cash utilized in financing activities during the fourth quarter of fiscal 2018 mainly consisted of dividends paid of R14.1 million ($1.0 million) offset by proceeds from the issuance of shares in respect of employee share options of R5.2 million ($0.4 million).

Financial performance for the fiscal year ended March 31, 2019

Subscription revenue: Subscription revenue increased to R1,693.2 million ($116.9 million), an increase of 18.0% compared to R1,434.6 million ($99.1 million) for fiscal 2018. On a constant currency basis, subscription revenue increased by 16.3%. Subscription revenue benefited from an increase of 73,600 subscribers from April 2018 to March 2019, representing an increase in subscribers of 10.9% during fiscal 2019. Subscription revenue also benefited from a higher average revenue per user.

Total revenue: Total revenue for fiscal 2019 was R1,975.9 million ($136.5 million), an increase of 15.4% compared to R1,712.5 million ($118.3 million) for fiscal 2018. On a constant currency basis, total revenue increased by 13.5%. Hardware and other revenue was R282.6 million ($19.5 million), compared to R277.9 million ($19.2 million) for fiscal 2018.

Gross margin: Gross profit was R1,320.0 million ($91.2 million), an increase of 17.3% compared to R1,125.5 million ($77.7 million) for fiscal 2018. Gross profit margin was 66.8%, compared to 65.7% for fiscal 2018.

Operating margin: Operating profit was R338.9 million ($23.4 million), compared to R215.0 million ($14.8 million) in fiscal 2018. The operating margin was 17.2%, compared to the 12.6% in fiscal 2018. The margin expansion was attributable primarily to the revenue growth leveraging the Group’s fixed overheads, and ongoing cost management initiatives. Operating expenses represented 49.7% of revenue compared to 53.4% of revenue in fiscal 2018.

Adjusted EBITDA: Adjusted EBITDA was R602.8 million ($41.6 million), compared to R441.9 million ($30.5 million) for fiscal 2018. The Adjusted EBITDA margin for fiscal 2019 was 30.5%, compared to 25.8% in fiscal 2018.

Profit for the year and earnings per share: Profit for fiscal 2019 was R202.3 million ($14.0 million), compared to R181.2 million ($12.5 million) in fiscal 2018. Profit for the year included a net foreign exchange gain of R0.4 million ($0.03 million) before tax. During fiscal 2018, a net foreign exchange loss of R5.1 million ($0.4 million) was recognized.

Earnings per diluted ordinary share were 35 South African cents, compared to 32 South African cents in fiscal 2018. For fiscal 2019, the calculation was based on diluted weighted average ordinary shares in issue of 583.6 million, compared to 574.0 million diluted weighted average ordinary shares in issue during fiscal 2018.

The Group’s effective tax rate was 40.5%, compared to 15.7% for fiscal 2018. Ignoring the impact of net foreign exchange gains and losses net of tax and share based compensation costs related to Performance Share Awards net of tax, the effective tax rate, which was used in calculating adjusted earnings, was 26.3% compared to 28.7% in fiscal 2018.

During the fourth quarter of fiscal 2019 the Group recognized deferred tax assets of R3.6 million ($0.3 million) in respect of a portion of the available tax losses in the Americas, Brazil and Europe segments. These tax losses were incurred in prior years. An ongoing improvement in these regions' results has resulted in these deferred tax assets being recognized in respect of the future utilization of the historical tax loss considered probable at period end. The recognition of these deferred tax assets reduced the Group’s effective tax rate for the year by 1.1%.

Adjusted earnings for the year and adjusted earnings per share: Adjusted earnings for fiscal 2019, a non-IFRS measure, was R254.4 million ($17.6 million), compared to R156.8 million ($10.8 million) in fiscal 2018. Adjusted earnings per diluted ordinary share, also a non-IFRS measure, were 44 South African cents, compared to 27 South African cents for fiscal 2018.

On a U.S. Dollar basis, using the March 31, 2019 exchange rate of R14.4789 per U.S. Dollar, and a ratio of 25 ordinary shares to one ADS, adjusted earnings were $17.6 million, or 75 U.S. cents per diluted ADS, compared to $10.8 million, or 47 U.S. cents per diluted ADS in fiscal 2018.

Statement of Financial Position and Cash Flow: The Group generated R463.8 million ($32.0 million) in net cash from operating activities for fiscal 2019 and invested R286.5 million ($19.8 million) in capital expenditures during the year (including investments in in-vehicle devices of R191.6 million or $13.2 million), leading to free cash flow of R177.4 million ($12.3 million), compared to free cash flow of R14.9 million ($1.0 million) for fiscal 2018. Capital expenditures in fiscal 2018 were R338.3 million ($23.4 million) and included in-vehicle devices of R229.8 million ($15.9 million).

The Group utilized R138.7 million ($9.6 million) in financing activities, compared to R62.5 million ($4.3 million) utilized during fiscal 2018. The cash utilized in financing activities in fiscal 2019 mainly consisted of the repurchase of 9.2 million ordinary shares, which resulted in a cash outflow of R73.5 million ($5.1 million), dividends paid of R67.5 million ($4.7 million) and the repayment of lease liabilities of R11.4 million ($0.8 million), offset by proceeds from issuance of shares in respect of employee share options of R13.8 million ($1.0 million). The cash utilized in financing activities in fiscal 2018 included the repurchase of 5.0 million ordinary shares, which resulted in a cash outflow of R18.7 million ($1.3 million) and dividends paid of R53.2 million ($3.7 million).

Segment commentary for the fiscal year ended March 31, 2019

The segment results below are presented on an integral margin basis. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the non-IFRS profit measure identified by the Group), the margin generated by our Central Services Organization (“CSO”), net of any unrealized inter-company profit, is allocated to the geographic region where the external revenue is recorded by our Regional Sales Offices (“RSOs”).

CSO continues as a central services organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers and distributors. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments. CSO’s operating expenses are not allocated to each RSO.

Each RSO’s results reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the CSO and corporate cost allocations.

Preliminary financial information

The reviewed but unaudited financial information set forth above is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been finalized for the Group’s year-end audit, which could result in potential differences from this preliminary reviewed but unaudited condensed financial information. Any changes to the financial information from the completion of the audit will be announced on SENS.

Business Outlook

MiX Telematics has translated U.S. Dollar amounts in this Business Outlook paragraph from South African Rand at an exchange rate of R14.3842 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at May 8, 2019.

Based on information as of today, May 14, 2019, the Group is issuing the following financial guidance for the full 2020 fiscal year:

• Subscription revenue - R1,935 million to R1,955 million ($134.5 million to $135.9 million), which would represent subscription revenue growth of 14.3% to 15.5% compared to fiscal 2019. On a constant currency basis, this would represent subscription revenue growth of 12.8% to 14.0%.
• Total revenue - R2,182 million to R2,212 million ($151.7 million to $153.8 million), which would represent revenue growth of 10.4% to 12.0% compared to fiscal 2019. On a constant currency basis, this would represent revenue growth of 8.9% to 10.5%.
• Adjusted EBITDA - R680 million to R701 million ($47.3 million to $48.7 million), which would represent Adjusted EBITDA growth of 12.8% to 16.3% compared to fiscal 2019.
• Adjusted earnings per diluted ordinary share of 45.1 to 50.2 South African cents based on a weighted average of 585 million diluted ordinary shares in issue, and based on an effective tax rate of 28.0%. At a ratio of 25 ordinary shares to one ADS, this equates to adjusted earnings per diluted ADS of 78.4 to 87.2 U.S. cents.

For the first quarter of fiscal 2020 the Group expects subscription revenue to be in the range of R451 million to R457 million ($31.4 million to $31.8 million) which would represent subscription revenue growth of 15.5% to 17.1% compared to the first quarter of fiscal 2019. On a constant currency basis, this would represent subscription revenue growth of 10.5% to 12.1%.

The key assumptions used in deriving the forecast are as follows:

• Growth in subscription revenue and subscribers are based on expected growth rates related to market conditions and takes into account growth rates achieved previously.
• Achieving hardware sales according to expectations, as hardware sales are dependent on the volumes of bundled solutions selected by customers.
• An average forecast exchange rate for the 2020 fiscal year of R14.3000 per $1.00.

The forecast is the responsibility of the Board of Directors and has not been reviewed or reported on by the Group’s external auditors. The Group’s policy is to give guidance on a quarterly basis, if necessary, and does not update guidance between quarters.

The Group provides earnings guidance only on a non-IFRS basis and does not provide a reconciliation of forward-looking Adjusted EBITDA and Adjusted Earnings per Diluted Ordinary Share guidance to the most directly comparable IFRS financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for foreign exchange gains/(losses) and related tax consequences, restructuring costs, share-based compensation costs, and other charges reflected in the Group’s reconciliation of historic non-IFRS financial measures, the amounts of which, based on past experience, could be material.

The information disclosed in this “Business Outlook” paragraph complies with the disclosure requirements in terms of paragraph 8.38 of the JSE Listings Requirements which deals with profit forecasts.

Quarterly Reporting Policy in respect of JSE Listings Requirements

Following the listing of the Group’s ADSs on the New York Stock Exchange, the Group has adopted a quarterly reporting policy. As a result of such quarterly reporting the Group is, in terms of paragraph 3.4(b)(ix) of the JSE Listings Requirements, not required to publish trading statements in terms of paragraph 3.4(b)(i) to (viii) of the JSE Listings Requirements.

Conference Call Information

MiX Telematics management will also host a conference call and audio webcast at 8:00 a.m. (Eastern Daylight Time) and 2:00 p.m. (South African Time) on Tuesday, May 14, 2019 to discuss the Group’s financial results and current business outlook:

• The live webcast of the call will be available at the “Investor Information” page of the Group’s website, http://investor.mixtelematics.com.
• To access the call, dial +1-877-451-6152 (within the United States) or 0 800 983 831 (within South Africa) or +1-201-389-0879 (outside of the United States). The conference ID is 13689224.
• A replay of this conference call will be available for a limited time at +1-844-512-2921 (within the United States) or +1-412-317-6671 (within South Africa or outside of the United States). The replay conference ID is 13689224.
• A replay of the webcast will also be available for a limited time at http://investor.mixtelematics.com.

About MiX Telematics Limited

MiX Telematics is a leading global provider of fleet and mobile asset management solutions delivered as SaaS to customers managing over 750,000 assets in approximately 120 countries. The Group’s products and services provide enterprise fleets, small fleets and consumers with solutions for safety, efficiency, risk and security. MiX Telematics was founded in 1996 and has offices in South Africa, the United Kingdom, the United States, Uganda, Brazil, Mexico, Australia, Romania, Thailand and the United Arab Emirates as well as a network of more than 130 fleet partners worldwide. MiX Telematics shares are publicly traded on the Johannesburg Stock Exchange (JSE: MIX) and MiX Telematics American Depositary Shares are listed on the New York Stock Exchange (NYSE: MIXT). For more information visit www.mixtelematics.com.

Forward-Looking Statements

This press release includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements concerning our financial guidance for the first quarter and full year of fiscal 2020, our position to execute on our growth strategy, and our ability to expand our leadership position. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, those described under the caption “Risk Factors” in the Group’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) for the fiscal year ended March 31, 2018, as updated by other reports that the Group files with or furnishes to the SEC. The Group assumes no obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

Non-IFRS financial measures

Adjusted EBITDA

To provide investors with additional information regarding its financial results, the Group has disclosed within this press release, Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS financial measures, and they do not represent cash flows from operations for the periods indicated, and should not be considered an alternative to net income as an indicator of the Group’s results of operations, or as an alternative to cash flows from operations as an indicator of liquidity. Adjusted EBITDA is defined as the profit for the period before income taxes, net finance income/(costs) including foreign exchange gains/(losses), depreciation of property, plant and equipment including capitalized customer in-vehicle devices and right-of-use assets, amortization of intangible assets including capitalized in-house development costs and intangible assets identified as part of a business combination, share-based compensation costs, restructuring costs, profits/(losses) on the disposal or impairments of assets or subsidiaries, insurance reimbursements relating to impaired assets and certain litigation costs.

The Group has included Adjusted EBITDA and Adjusted EBITDA margin in this press release because they are key measures that the Group’s management and Board of Directors use to understand and evaluate its core operating performance and trends; to prepare and approve its annual budget; and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA margin can provide a useful measure for period-to-period comparisons of the Group’s core business. Accordingly, the Group believes that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating its operating results.

The Group’s use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this performance measure in isolation from or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, the Group’s working capital needs;
• Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;
• Adjusted EBITDA does not reflect tax payments or the payment of lease liabilities that may represent a reduction in cash available to the Group; and
• other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including operating profit, profit for the year and our other results.

Headline Earnings

Headline earnings is a profit measure required for JSE-listed companies and is calculated in accordance with circular 4/2018 issued by the South African Institute of Chartered Accountants. The profit measure is determined by taking the profit for the period prior to certain separately identifiable re-measurements of the carrying amount of an asset or liability that arose after the initial recognition of such asset or liability net of related tax (both current and deferred) and related non-controlling interest.

Adjusted Earnings and Adjusted Earnings Per Share

Adjusted earnings per share is defined as profit attributable to owners of the parent, MiX Telematics Limited, excluding net foreign exchange gains/(losses) net of tax and share based compensation costs related to Performance Share Awards net of tax, divided by the weighted average number of ordinary shares in issue during the period.

We have included Adjusted earnings per share in this press release because it provides a useful measure for period-to-period comparisons of the Group’s core business by excluding net foreign exchange gains/(losses) from earnings, as well as share based compensation costs related to Performance Share Awards. Performance Share Awards were awarded under the MiX Telematics Long-Term Incentive Plan for the first time in November 2018 and are aimed at incentivising management to achieve cumulative subscription revenue and Adjusted EBITDA targets for the 2019 and 2020 fiscal years.

Accordingly, we believe that Adjusted earnings per share provides useful information to investors and others in understanding and evaluating the Group's operating results.

Free cash flow

Free cash flow is determined as net cash generated from operating activities less capital expenditure for investing activities. We believe that free cash flow provides useful information to investors and others in understanding and evaluating the Group’s cash flows as it provides detail of the amount of cash the Group generates or utilizes after accounting for all capital expenditures including investments in in-vehicle devices and development expenditure.

Constant currency and U.S. Dollar financial information

Financial information presented in United States Dollars and constant currency financial information presented as part of the commentary constitute pro-forma financial information under the JSE Listings Requirements. Unless otherwise stated, MiX Telematics has translated U.S. Dollar amounts from South African Rand at the exchange rate of R14.4789 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at March 31, 2019.

Constant currency information has been presented to illustrate the impact of changes in currency rates on the Group’s results. The constant currency information has been determined by adjusting the current financial reporting period results to the prior period average exchange rates, determined as the average of the monthly exchange rates applicable to the period. The measurement has been performed for each of the Group’s currencies, including the U.S. Dollar and British Pound. The constant currency growth percentage has been calculated by utilizing the constant currency results compared to the prior period results.

This pro-forma financial information is the responsibility of the Group’s Board of Directors and is presented for illustrative purposes. Because of its nature, the pro-forma financial information may not fairly present MiX Telematics’ financial position, changes in equity, results of operations or cash flows. The pro-forma financial information does not constitute pro-forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro-forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa. The pro-forma financial information contained in this results announcement has been reviewed by our auditors, Deloitte & Touche and their unmodified report thereon is available for inspection at the Company’s registered office.

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NOTES TO PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL RESULTS

1. Basis of preparation and accounting policies

The preliminary condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited (“JSE”) Listings Requirements for preliminary condensed financial statements and the requirements of the Companies Act applicable to financial statements. The JSE Listings Requirements require preliminary condensed financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the preliminary condensed consolidated financial statements are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements, except for the adoption of IFRS 9 Financial Instruments (“IFRS 9”), IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) and IFRS 16 Leases (“IFRS 16”) from April 1, 2018.

The preliminary condensed consolidated financial statements were prepared under the supervision of the Interim Chief Financial Officer, PM Dell, CA(SA). The results were made available on May 14, 2019.

Adoption of IFRS 9, IFRS 15 and IFRS 16

IFRS 9 is effective for the Group from April 1, 2018.

IFRS 15 permits a modified retrospective cumulative catch-up approach for the adoption, which the Group has decided to apply. Under this approach, the Group has recognized transitional adjustments in retained earnings on the date of initial application (i.e. April 1, 2018), without restating the comparative period. Under the practical expedient, the new requirements were only applied to contracts that were not completed as of April 1, 2018.

IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019, but can be early adopted. Given that the Group applied IFRS 15 from April 1, 2018, the Group decided to early adopt IFRS 16 from this date.

The Group has chosen to apply the ‘simplified approach’ on adoption of IFRS 16 that includes certain relief related to the measurement of the right-of-use asset and the lease liability at April 1, 2018, rather than full retrospective application. Furthermore, the ‘simplified approach’ does not require a restatement of comparatives.

Refer to Note 2.1.1.2 of our consolidated financial statements for the year ended March 31, 2018 for further details on the adoption of the above mentioned standards.

Summary of the impact at April 1, 2018 of adopting IFRS 9, IFRS 15 and IFRS 16:

Summary of impact on fiscal 2019 results of adopting IFRS 9, IFRS 15 and IFRS 16:

The only material impact on the condensed consolidated income statement for fiscal 2019 was a R7.9 million ($0.6 million) increase in finance costs. This was primarily as a result of IFRS 15 significant financing activity interest expense and IFRS 16 capitalized lease liability interest. The impact on every other line item in the condensed consolidated income statement for fiscal 2019 was not material.

The only adjustment to the statement of cash flows was an outflow of R11.4 million ($0.8 million) in respect of the capital portion of lease liability payments being recorded in cash flows from financing activities as a result of the adoption of IFRS 16. This outflow was previously accounted for as an operating lease expense and included under cash generated from operations.

Presentation currency and convenience translation

The Group’s presentation currency is South African Rand. In addition to presenting these preliminary condensed consolidated financial results in South African Rand, supplementary information in U.S. Dollars has been prepared for the convenience of users of the Group financial results. Unless otherwise stated, the Group has translated U.S. Dollar amounts from South African Rand at the exchange rate of R14.4789 per $1.00, which was the R/$ exchange rate reported by Oanda.com as at March 31, 2019. The U.S. Dollar figures may not compute as they are rounded independently.

The supplementary information prepared in U.S. Dollars constitutes pro-forma financial information under the JSE Listings Requirements. This pro-forma financial information is the responsibility of the Group’s Board of Directors and is presented for illustrative purposes. Because of its nature, the pro-forma financial information may not fairly present MiX Telematics’ financial position, changes in equity, results of operations or cash flows. The pro-forma financial information does not constitute pro-forma information in accordance with the requirements of Regulation S-X of the SEC or generally accepted accounting principles in the United States. In addition, the rules and regulations related to the preparation of pro-forma financial information in other jurisdictions may also vary significantly from the requirements applicable in South Africa.

2. Independent review

The preliminary condensed consolidated financial statements for the year ended March 31, 2019 have been reviewed by Deloitte & Touche, who expressed an unmodified review conclusion thereon, which is available for inspection at the Company's registered office. The auditor's report does not necessarily report on all the information contained in these financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial information from the Company's registered office. Any reference to future financial performance, included in this announcement, has not been reviewed or reported on by the Company’s auditors.

3. Segment information

Our operating segments are based on the geographical location of our Regional Sales Offices (“RSOs”) and also include our Central Services Organization (“CSO”). CSO is our central services organization that wholesales our products and services to our RSOs who, in turn, interface with our end-customers, distributors and dealers. CSO is also responsible for the development of our hardware and software platforms and provides common marketing, product management, technical and distribution support to each of our other operating segments.

The chief operating decision maker (“CODM”) reviews the segment results on an integral margin basis as defined by management. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified collectively as the executive committee and the Chief Executive Officer who make strategic decisions. In respect of revenue, this method of measurement entails reviewing the segmental results based on external revenue only. In respect of Adjusted EBITDA (the profit measure identified by the CODM), the margin generated by CSO, net of any unrealized intercompany profit, is allocated to the geographic region where the external revenue is recorded by our RSOs. The costs remaining in CSO relate mainly to research and development of hardware and software platforms, common marketing, product management and technical and distribution support to each of the RSOs. CSO is a reportable segment of the Group because it produces discrete financial information which is reviewed by the CODM and has the ability to generate external revenues.

Each RSO’s results therefore reflect the external revenue earned, as well as the Adjusted EBITDA earned (or loss incurred) by each operating segment before the remaining CSO and corporate costs allocations. Segment assets are not disclosed as segment information is not reviewed on such a basis by the CODM.